Financial Services _Çô Client Services RFC121 Lecture Notes - Pension, Term Life Insurance, Canada Pension Plan
5 Jun 2018
School
Department
Professor
Estimating Your Life Insurance Requirements
▪ The Income Replacement Method
▪ Typically, you will need 70% of your salary for seven years while
family adjusts
$____current income x 7 = $_____ x 0.70 = $_____
▪ Assumes a “typical” family with NO liquid assets available that
would otherwise reduce your life insurance needs
▪ The “Family Need” Method
▪ More thorough than the first method because it also considers
employer provided insurance, Social Security benefits, and income
and assets.
Exercise – Family Needs Method
You and your spouse are in good health and have reasonably secure
careers.
You make about $35,000 annually and have opted for life insurance
coverage of 3 times your salary through your employer.
Considering your spouse’s income, you are able to absorb on-going
living costs of $45,000 a year.
You own a home with an $80,000 mortgage.
Other debts include:
$10,000 car loan,
$5,000 student loan
$3,000 charged to credit cards.
In the event of your death, you wish to leave your family debt-free.
An important financial goals is an education fund of $50,000 for your
child
To date, you have accumulated $15,000 toward this goal.
Exercise – Family Needs Method
Should you die, your beneficiaries would receive a $2,500 lump sum
find more resources at oneclass.com
find more resources at oneclass.com
Document Summary
Estimating your life insurance requirements: the income replacement method, typically, you will need 70% of your salary for seven years while family adjusts. You and your spouse are in good health and have reasonably secure careers. You make about ,000 annually and have opted for life insurance coverage of 3 times your salary through your employer. Considering your spouse"s income, you are able to absorb on-going living costs of ,000 a year. You own a home with an ,000 mortgage. In the event of your death, you wish to leave your family debt-free. An important financial goals is an education fund of ,000 for your child. To date, you have accumulated ,000 toward this goal. Should you die, your beneficiaries would receive a ,500 lump sum payment from the canada pension plan and ,000 from your corporate pension plan. Use the family need method to determine your life insurance needs.
